Passed in California’s State Assembly last month, Assembly Bill (AB) 1229 was written to expressly authorize any county or city in California to include inclusionary housing requirements (a.k.a. Below Market Rate units) as a condition of approval for the development of new housing, a requirement which was successfully challenged in the case of Palmer versus the City of Los Angeles.
In 2009, in the case of Palmer v. City of Los Angeles, the Second District California Court of Appeal opined that the city’s affordable housing requirements associated with a particular specific plan (akin to an inclusionary zoning ordinance), as it applied to rental housing, conflicted with and was preempted by a state statute known as the Costa-Hawkins Rental Housing Act. The Costa-Hawkins Act limits the permissible scope of local rent control ordinances. Among its various provisions is the right for a rental housing owner generally to set the initial rent level at the commencement of a tenancy, even if the local rent control ordinance would otherwise limit rent levels across tenancies. This provision is known as vacancy decontrol because the rent level is temporarily decontrolled after a voluntary vacancy. The act also gives rental housing owners the right to set the initial and all subsequent rental rates for a unit built after February 1, 1995. The court opined that “forcing Palmer to provide affordable housing units at regulated rents in order to obtain project approval is clearly hostile to the right afforded under the Costa-Hawkins Act to establish the initial rental rate for a dwelling or unit.”
This past Sunday, Governor Jerry Brown vetoed the bill. From the Governor:
This bill would supersede the holding of Palmer v. City of Los Angeles and allow local governments to require inclusionary housing in new residential development projects.
As Mayor of Oakland, I saw how difficult it can be to attract development to low and middle income communities. Requiring developers to include below-market units in their projects can exacerbate these challenges, even while not meaningfully increasing the amount of affordable housing in a given community.
The California Supreme Court is currently considering when a city may insist on inclusionary housing in new developments. I would like the benefit of the Supreme Court’s thinking before we make legislative adjustments in this area.
AB-1229 Land use: zoning regulations [ca.gov]